GOU SAYS THAT BILATERAL ASSISTANCE AGREEMENT DOES

UNCLAS TASHKENT 000536 SIPDIS SENSITIVE SIPDIS DEPARTMENT FOR SCA/CEN AND EUR/ACE DEPARTMENT AND EMBASSY ASTANA PLEASE PASS TO USAID E.O. 12958: N/A TAGS: PGOV PREL EAID UZ SUBJECT: GOU SAYS THAT BILATERAL ASSISTANCE AGREEMENT DOES NOT APPLY TO NGO TAX CASES REF: A. TASHKENT 515 ¶B. TASHKENT 203 ¶C. 06 TASHKENT 2402 Sensitive but unclassified. Please protect accordingly. ¶1. (SBU) On April 2, Post received a diplomatic note from the Ministry of Foreign Affairs stating that the U.S.-Uzbekistan Bilateral Assistance Agreement does not apply to ongoing tax cases against four U.S. nongovernmental organization (reftels). The note was in response to Post's diplomatic note, dated February 5, reminding the government that it cannot seize funds provided by, or derived from, U.S. assistance programs and that doing so would violate the Bilateral Assistance Agreement. The Uzbek response argues that the agreement does not apply in these cases because financial sanctions were imposed for failing to deposit money into bank accounts as allegedly required under Uzbek law, and not as the result of tax issues. ¶2. (SBU) ACDI/VOCA representatives informed Post April 2 that tax authorities have taken $168,000 from its operating account. Despite winning its initial case in Andijon City Economic Court, the organization's operating account was frozen by tax authorities on March 12. ACDI/VOCA was successful in getting the account released on March 20, but by that time all of the fund in the account had been seized. The organization had been transferring funding from its accounts to a trust account established by Post; however, its latest attempt to transfer funds during the week of March 26 was blocked. ¶3. (SBU) Comment: It is possible that not all of the money confiscated from ACDI/VOCA's bank accounts came from U.S. assistance activities, as the organization also received funding from the United Nations Development Program. However, we suspect that the bulk of the money belonged to the USG. ACDI/VOCA's blocked transfer the week of March 26, combined with the withdrawal of money from the Embassy account transferred by the Foundation for International Community Assistance (ref A) suggests that the government is on to the efforts to protect funding at risk of seizure, and that the window of opportunity for doing so has closed. According to Post's latest figures, about $1 million in total USG funding is at risk of seizure from ACDI/VOCA and FINCA's bank accounts. PURNELL